A company projects a rate of return of 20% on new projects. The executive team plan to plow back 20% of all earnings into the firm. Earnings this year will be $6 per share, and investors expect a rate of return of 12% on stocks facing the same risks as the company.
1) what is the sustainable growth rate
2) what is the stock price
3) What is the present value growth opportunities
4) what is the P/E ration
5) what would the price and PE ratio be if the firm paid out all earnings as dividends?
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